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(Alliance News) - Shares in London are set to open lower on Wednesday, with virus worries in China harming sentiment once again, while attention also is on US politics.
There was little evidence of a 'red wave' for US Republicans as votes from the midterm elections are counted. A win for US President Joe Biden's Democrats in swing state Pennsylvania enhanced their chances of keeping a thin majority in the Senate.
"We do not expect the election results to have any material impact on US fiscal or monetary policies. If the Republicans indeed gain a majority in the House of Representatives, or even if they take control of both the House and the Senate, fiscal policy gridlock on any new legislation will likely prevail. The Federal Reserve will continue raising interest rates in its effort to reduce inflation," Berenberg analyst Holger Schmieding commented.
Rising Covid-19 cases hit Chinese equities. Economic figures from China also showed that producer prices declined annually for the first time in nearly two years in October and that consumer price inflation abated.
In UK corporate updates, insurer Aviva and housebuilder Taylor Wimpey backed guidance. Paddy Power-owner Flutter has made strong progress in the US.
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called down 0.3% at 7,283.14
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Hang Seng: down 1.6% at 16,297.42
Nikkei 225: down 0.6% at 27,716.43
S&P/ASX 200: up 0.6% at 6,999.30
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DJIA: closed up 333.83 points, 1.0%, at 33,160.83
S&P 500: closed up 21.31 points, 0.6%, at 3,828.11
Nasdaq Composite: closed up 51.68 points, 0.5%, at 10,616.20
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EUR: soft at USD1.0064 (USD1.0075)
GBP: down at USD1.1539 (USD1.1566)
USD: up at JPY145.83 (JPY145.49)
GOLD: down at USD1,710.51 per ounce (USD1,712.35)
OIL (Brent): down at USD95.15 a barrel (USD97.81)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
1100 GMT Ireland industrial production
1300 GMT UK BoE MPC member Jonathan Haskel speaks
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Peace in the UK cannot be taken for granted while Vladimir Putin wages war in Ukraine, Prime Minister Rishi Sunak said as he prepared to welcome Nato's chief to Downing Street. Jens Stoltenberg will become the first international leader to visit No 10 since Sunak became PM, in a sign of the concerns over the situation in Ukraine and the importance of the Nato alliance. The meeting comes as the government considers how to update its integrated review of defence and foreign policy to respond to the changing threats around the world. Ahead of the meeting on Wednesday, Sunak said: "Nato is the cornerstone of our security, and the security of our allies. As the war in Ukraine continues to rage, we must not take peace at home for granted. I am determined the UK will be the bedrock of Nato for generations to come. But in order to face the challenging future we must evolve as an alliance to meet, and remain ahead of, the threat from our adversaries. We must also continue backing the Ukrainian people in their resistance to Putin's brutality." The UK will send a further 12,000 extreme cold weather sleeping kits and 150 tents to Ukraine's military as troops face continued fighting during the freezing winter.
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Sunak faces questions about his judgment as Gavin Williamson quit the cabinet after just a fortnight in office. The PM will appear in the Commons to face MPs following the loss of his ally, who stood down after accepting that allegations about his conduct had become "a distraction". At Prime Minister's Questions, Sunak could face pressure to explain why he gave Williamson – who had already been sacked by Theresa May and Boris Johnson – a senior ministerial role despite being aware that he faced an investigation in relation to his behaviour. Sunak has also faced questions over reappointing Suella Braverman as home secretary after she was sacked for breaking ministerial rules by sending a draft official statement to an ally from her personal email. Williamson's decision to quit as minister without portfolio on Tuesday night followed allegations he sent expletive-laden messages to former chief whip Wendy Morton complaining about being refused an invitation to the Queen's funeral. He was also the subject of claims he bullied a former official at the Ministry of Defence and engaged in "unethical and immoral" behaviour while he was chief whip. Williamson said the allegations against him were "becoming a distraction for the good work this government is doing for the British people" and was stepping back to "clear my name".
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BROKER RATING CHANGES
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Barclays starts Liontrust Asset Management with 'overweight' - price target 1,130 pence
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Barclays raises Jupiter Fund Management to 'equal weight' (underweight) - price target 110 (120) pence
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COMPANIES - FTSE 100
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Insurer and wealth manager Aviva backed guidance as it hailed a "consistently strong" trading performance. Aviva said total life sales in the first nine months of 2022 fell 1.7% year-on-year to GBP25.78 billion from GBP26.23 billion. The value of new business surged 37% to GBP530 million, however. "Trading is positive and our performance is consistently strong. We have had a good nine months due to our market leading positions, our customer focus and the clear benefits of Aviva's diversified business across insurance, wealth and retirement," Chief Executive Officer Amanda Blanc said. Assets under management at September 30 rose 2.1% to GBP143 billion from GBP140 billion at the end of June. Aviva backed dividend guidance. It expects a 31.0 pence per share payout for 2022 and 32.5p for 2023. In addition, its intention to "return further capital to shareholders" next year was affirmed. Aviva declared a 10.3p interim dividend this year and paid 22.05p for all of 2021.
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Taylor Wimpey affirmed yearly guidance but its net private sales rate has weakened in the face of "heightened levels of economic uncertainty". Its year-to-date net private sales rate has fallen annually to 0.74 homes per outlet, from 0.95. "While sales rates have been impacted by wider economic uncertainty, we continue to see good levels of customer interest in our homes and a desire to get onto or move up the housing ladder," Chief Executive Jennie Daly said. Volumes for 2022 are expected to be at "broadly similar levels to 2021" amid market uncertainty. The company added: "Higher mortgage rates will contribute to the wider cost of living challenges affecting our customers. Despite the more challenging short-term conditions, we remain confident in the long term sector fundamentals with a continued meaningful supply and demand imbalance in UK housing." Taylor Wimpey expects annual operating profit in line with market expectations of GBP922 million. It achieved operating profit of GBP828.6 million in 2021.
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Flutter Entertainment lifted its US guidance and said it has seen "no discernible sign of slowdown" so far this year, despite punters grappling with a cost of living crisis. The gambling firm's total third-quarter revenue rose 31% year-on-year to GBP1.89 billion from GBP1.44 billion. Chief Executive Peter Jackson said: "Our US division is now our largest and generated USD700 million in revenue, up 82%. Good growth in our 'consolidate and invest' International markets and the acquisition of Sisal [in Italy] in August helped drive ex-US revenues." Flutter lifted US revenue guidance to between USD2.95 billion and USD3.2 billion. Its previous US revenue outlook range was USD2.85 billion to USD3.1 billion. Group adjusted earnings before interest, tax, depreciation and amortisation, excluding the US, are still expected to land between GBP1.29 billion and GBP1.39 billion. The "guidance reflects current consumer trends with no discernible sign of slowdown year to date", Flutter explained.
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COMPANIES - FTSE 250
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Marks & Spencer posted a first-half profit hike and drew attention to the "stand-out performance" by its Clothing arm, which has often been seen as its weakest offering. Group revenue in the half-year ended October 1 rose 8.5% annually to GBP5.54 billion from GBP5.11 billion. Pretax profit climbed 11% to GBP208.5 million from GBP187.3 million. "Trading in the first half has been robust with both businesses growing ahead of the market, reflecting the beginnings of a reshaped M&S. In Food, investment in trusted value has driven top-line growth but short-term profit has been reduced, although the acquisition of Gist gives us control of one of our biggest cost and efficiency levers. Clothing has delivered a stand-out performance from a market leading position in value with improving style credentials," CEO Stuart Machin said. UK Clothing & Home sales rose 14% year-on-year, while UK Food sales climbed 5.6%. "As we enter our traditionally strongest quarter, the business continues to trade well. Trading in the first four weeks of the second half is in line with forecasts, with Clothing & Home sales up 4.2%, Food sales up 3.0% and International up 4.1%," M&S added.
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JD Wetherspoon said like-for-like sales in the early stages of its current financial year are ahead of pre-virus levels. In the 14 weeks to November 6, like-for-like sales rose 9.6% year-on-year and by 0.4% against a pre-Covid comparative from three years earlier. However, it noted that costs "were substantially higher". The pub firm added: "Trading has been broadly in line with expectations, although October has been a slightly slower month. For the first 9 weeks of the financial year, sales were 1.5% above the same period in calendar-year 2019. For the last 5 weeks, sales were 1.1% lower than the same period in 2019."
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OTHER COMPANIES
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Bank of Ireland lifted annual guidance after enjoying a "strong business performance in the third quarter". The lender said net interest income in the nine months to September was 3% higher year-on-year, helped by rising interest rates. It now expects net interest income to rise by 6% to 7% in 2022. It had previously expected it to be "modestly higher". "This stronger outlook reflects the group's positive gearing to higher interest rates and a faster interest rate hiking cycle in H2 2022 versus expectations earlier in the year," Bank of Ireland said.
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Gym Group said membership numbers are up and revenue has surged so far in 2022. In the ten months to October 31, revenue has jumped 78% year-on-year to GBP143.2 million from GBP80.5 million. Membership numbers amounted to 838,000 at the end of October, up 17% from 718,000 at the end of 2021. "We continue to manage our utility and other costs carefully. Energy volumes are 63% hedged until the end of 2023," the gym chain said.
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By Eric Cunha; ericcunha@alliancenews.com
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